Eutelsat pushes back return-to-growth forecast amid satellite delays

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TAMPA, Fla. — Eutelsat said Feb. 17 it expects a revenue slump to stretch into 2023 as it awaits the launch of two delayed satellites critical to a turnaround.

The French satellite operator had previously forecast a return to growth when its new fiscal year begins July 1. But that was before pandemic-related issues delayed delivery of Konnect VHTS and Eutelsat 10B, pushing out the introduction of the two connectivity-focused satellites.

The forecast slip underlines the importance of Eutelsat’s connectivity business to its financial performance as broadcast revenues continue to fall.

Eutelsat said total year-over-year revenues fell 4.7% to 572 million euros ($640 million) during the second half of 2021 when adjusted for currency changes.

Broadcast revenues fell 7.5% over the period to 351 million euros, which Eutelsat said was partly driven by a slowdown in new business from Europe.

Revenue from government services dropped 3.8% to 74 million euros as the withdrawal of U.S. troops from Afghanistan reduced demand.

However, boosted by wholesale capacity agreements with terrestrial telcos in France and Italy, fixed broadband services rose 37.3% to 30 million euros.

Mobile connectivity revenues also climbed 9.8% to 37 million euros as Eutelsat’s software-defined, reprogrammable Eutelsat Quantum satellite entered service following its launch in mid-2021.

Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, fell 10% to 436 million euros.

Eutelsat said it expects full-year revenue from operating verticals to total 1.11-1.15 billion euros for its current fiscal year ending June 30, down from 1.23 billion euros for the prior year.

Satellite delays

Konnect VHTS and Eutelsat 10B satellite delays have “a mechanical effect on our expectations for subsequent years,” Eutelsat said in its Feb. 17 financial report. 

Konnect VHTS is now slated to enter service in the second half of 2023 instead of the first. While Eutelsat continues to expect Eutelsat 10B to come online in the first half of 2023, it said its entry into service is delayed within that window.

According to Eutelsat, the setbacks reflect the impact of manufacturing delays “and their knock-on effects, including pairing difficulties, related to launch rescheduling, in the context of global Covid crisis.”

Thales Alenia Space, which recently told Canada’s Telesat that pandemic-related supply chain issues are delaying the production of its low Earth orbit (LEO) broadband constellation, is building both geostationary orbit satellites for Eutelsat.

The disruption caused by COVID-19 on satellite supply chains is not limited to European manufacturers. In the United States, Viasat said Feb. 3 that the first ViaSat-3 satellite it is building in partnership with Boeing had been delayed until late summer, following impacts related to COVID-19.

Eva Berneke, who joined as Eutelsat CEO at the start of 2022, said in a statement: “Although we have mechanically revised down our medium-term revenue expectations on the back of delayed availability of capacity, I am confident we have the elements in place to enable us to return to growth from FY 2023-24 and continue to deliver long-term value to our shareholders.”

U.K.-based LEO broadband startup OneWeb, which has said it expects to launch global broadband services this year after deploying the remaining satellites in its constellation, is set to play an important role in Eutelsat’s connectivity growth engine.

Eutelsat said it has built up a 22.9% stake in OneWeb. The French operator also said it had received $125 million in December through spectrum-clearing proceeds, after vacating C-band frequencies in the United States for use by terrestrial mobile operators.